Economics, Equilibrium Methods, and Multi-Scale Modeling

In this paper, I draw a parallel between the stability of physical systems and that of economic ones, such as the US financial system. I argue that the use of equilibrium assumptions is central to the analysis of dynamic behavior for both kinds of systems, and that we ought to interpret such idealizing strategies as footholds for causal exploration and explanation. Our considerations suggest multi-scale modeling as a natural home for such reasoning strategies, which can provide a backdrop for the assessment and (hopefully) prevention of financial crises. Equilibrium assumptions are critical elements of the epistemic scaffolding that make up multi-scale models, which we should understand as a means of constructing explanations of dynamic behavior.

Duke Scholars

Author Jennifer S. Jhun Philosophy